Perry claim about dollars leaving Missouri for Texas oversimplifies IRS data

Do dollars slip from state to state?

Texas Gov. Rick Perry suggested as much in a radio ad aired in Missouri as he framed his case for businesses there to slip away to Texas.

In the ad, posted online Aug. 21, 2013, Perry said: "Every year, more than $40 million are leaving Missouri for the Lone Star State." (He failed to say, "'Show Me' the money.")

To our inquiry, Perry spokesman Josh Havens said the $40 million traces to an online application created by Travis H. Brown, CEO of a St. Louis public affairs and advocacy firm and author of the 2013 book,"How Money Walks." Havens said clicking on Missouri on the app shows that between 1992 and 2010, more than $791 million "was lost to the state of Texas. That equates to more than $40 million each year."

We confirmed his figures on the "Wealth Migration" app, which indicates that Missouri lost an average of $1.38 billion in adjusted gross income from 1992 through 2010--with the net loss to Texas alone totaling $791.3 million. As defined by the Internal Revenue Service, adjusted gross income is a person’s gross income minus adjustments. "For most people," according to the app, adjusted gross income "is the starting point in calculating their taxable income" for federal tax purposes.

At a glance, then, Perry's math seems to work. But is it accurate to say all those dollars annually leave Missouri for Texas?

We failed to connect with Brown, but an analyst with the Washington, D.C.-based Tax Foundation, which researches state and federal tax policy, told us the IRS annually makes available its data tallying changes in adjusted gross income across the country and state to state--also taking into account how many taxpayers have moved from one state to another since the previous year’s filings.

For instance, the foundation’s Nick Kasprak said by phone, if a taxpayer in Missouri had adjusted gross income of $30,000 one year and then the next year filed a return from Texas showing $65,000 in such income, the IRS would record that as $30,000 moving to Texas--basing that on the adjusted gross income reported in Missouri in the first tax year.

A foundation web page breaks down such IRS data for 1993 through 2010, the latest year of available data. Adjusted for inflation, according to the foundation, Texas netted $862 million in adjusted gross income from Missouri over the 17 years, or nearly $51 million a year on average. By email, Kasprak told us the net difference in raw dollars over the 17 years was $710 million, or an annual average of $42 million.

This net shift in Texas’s favor exceeded $40 million in 11 of the 17 years, including every year from 2006 through 2010, as shown on a chart we generated. The year 2005 was the latest one in which there was less than a $40 million difference, according to the chart. The low point:  In 2001, the difference was less than $7.4 million.

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Source: Web interactive, "State to State Migration Data," the Tax Foundation (accessed Aug. 29, 2013)

Per Perry’s statement, Kasprak said it would be helpful to clarify that the cited adjusted gross income figures refer to how much money was made by residents of Texas in their previous year living in Missouri. That is not the same, he said, as saying that those exact earnings moved to Texas.

"It’s not as if these people are literally carrying sacks of money over the border," Kasprak said. "The only thing that is literally true is that if you add up all income of people who moved from Missouri to Texas versus people who moved from Texas to Missouri, this is the net difference" in the tax year prior to their moves.

Another expert, Art Hall, director of the Center for Applied Economics at the University of Kansas, agreed by phone that Perry’s statement reflects only what individuals earned in the state they departed, either Missouri or Texas. "We don’t know if they got a wage increase or wage cut when they moved to Texas or vice versa," Hall said. Regardless, Hall said he considers Perry’s statement in line with the IRS data as adjusted for inflation by the foundation.

Our ruling

Perry said: "Every year, more than $40 million are leaving Missouri for the Lone Star State."

That assessment ties to IRS data on adjusted gross income for 1992 through 2010, but the results are more complex and admittedly clunky than this claim acknowledges. That is, Missouri residents who moved to Texas through those years earned more the year before they moved than all income-tax-filing Texas residents who moved to Missouri in those years.  

Still, adjusted for inflation, the annual difference averages about $50 million--more than Perry’s unadjusted figure. Then again, this did not hold for every year. In six years--most recently 2005--there was less than a $40 million difference.

On balance, we rate this claim as Half True.

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HALF TRUE – The statement is partially accurate but leaves out important details or takes things out of context.

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